Recently I was lucky enough to escape an extremely cold Michigan and head to Hollywood Beach, Florida for Inside ETFs. While fun in the sun was top of mind, it was last on the agenda. The conference was well attended by more than 1,500 advisors and industry professionals and helped me expand my understanding of Exchange Traded Funds (ETFs) and where they best fit in portfolios.
The first day was appropriately themed ETF University. Experts started from the most basic level of understanding explaining what ETFs are and why investors utilize them. They went on to explain how to trade these investments as their liquidity throughout the trading day is their most unique characteristic. This is also, clearly, the most confusing and aspect of an exchange traded fund versus any other investment. Much of my time during and after the conference has been spent furthering my understanding of this topic.
3 Key Market Trends and Research
Besides muddling through EFT University, I had the chance to attend sessions focused on current events in the economy and markets around the world. Here are some key trends:
Emerging Markets in Crisis: Negative sentiment, fear and pessimism in emerging markets is reaching a crescendo, presenting potentially excellent buying opportunities.
Secular Bull Market in U.S. Equities: Well-known economists Liz Ann Sonders and Jeremy Siegel argued we are in the midst of a new secular bull market that began in 2009. While they expect corrections over the coming years, overall they feel the long-term trend will continue to be positive.
The Bond Bear: While the outlook for bonds are bleak, with the rising interest rate environment perceived to be just on the horizon, they are still one of the best hedges to an equity portfolio. Bonds continue to be one of the only negatively correlated asset classes to stocks. In other words, when stocks fall bonds rise and vice versa. This is very important to reducing overall volatility of a portfolio and should not be abandoned, even now.
These key themes resonated with me as our investment committee at The Center has been discussing and actively incorporating changes to reflect these concerns in clients’ portfolios over the past few years.
While I am a fan of the old adage, “If it ain’t broke don’t fix it,” this should never apply to your investment portfolio. It is very important to continually monitor the investment and financial planning landscape because it constantly changes. Exchange Traded Funds are likely here to stay and their benefits to some investor’s portfolios are undeniable.
Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.